Gainers and losers in the Satyam fraud!!

While it is easy and convenient to crucify Raju and Satyam at this juncture, it is imperative to look at the real losers and winners.

First the winners:

1. The Media: For more than a month after the Mumbai attacks, the media in general and the business press (both print and electronic) in particular, was getting restless for want of sensationalism. Thanks to Raju, there is something to talk about or to show all 24 hours, leave alone that most of it is conjecture and the rest is drivel. Wow! What content!! Given that there are lot of villains like Raju himself, Satyam company, Board of Directors, Auditors etc, it is like a dream run for the press.

2. “Experts“: Everyone from SEBI to ROC, from NASSCOM to ICAI are being interviewed. Doesn’t matter if they are current or ex, they have suddenly discovered corporate governance, auditing standards, India Inc as a platform to pontificate and they are doing a great job.

3. Competing IT companies: This is a great way to begin a new year what with good employees, prized client accounts are available for the taking! Great story to tarnish the reputation (whatever is left) of Satyam at deals being negotiated or renegotiated! Tech Mahindra is already talking about the telecom business of Satyam!!

4. The law makers at SEBI, ROC et al: Using this as an opportunity, these institutions will start demanding greater disclosures (whatever they did with the existing ones, nobody knows), more forms to fill and file (with the adjunct fees as well)

5. The ruling party and the opposition: With this great story in front, who is going to be bothered about inflation, fitting response to terrorism et al? All the ministers will now issue statements to show their concern for the stake holders and hope that the other real issues will fade away. The opposition will try and blow it up to cover its own flanks and try to derive political mileage.

6. Investors: This might be really shocking when i say that Investor community will a winner out of this fraud. True, they have been shocked out of their sleep but if they continue to stay awake, they would make better investment decisions than just follow the herd. they would also become more sensible in having a portfolio that is quite diverse. They would perhaps take all the ‘guidance’ with a pinch of salt and actually start investing rather than speculate.

7. Stakeholders of Satyam itself: This is ridiculous! They have just lost their shirts. how can you call them winners? All along when the satyam share price was rising on the back of the cooked-up figures, these very same people made merry and had a party. All those who were operating in the Satyam counter, went on a long ride for quite some time and only yesterday had a free fall. They gained more than they lost! Not easy to digest??

That’s quite a handful, isn’t it? Now let’s take a look at the real losers!!

1. The staff at Satyam: The worst nightmare is not knowing whether there is going to be a job at all! For those employees who have been asked to leave, they may have to deal with the circumstances of losing their jobs but atleast they know that they don’t have one. But those who are facing the uncertainty of their job would oscillate between hope and despair and hence most hit.

2. The existing Customers: They would be in a dilemma that Hamlet faced “To Switch or Not to Switch, that’s the question!”. The stigma that enveloped the accounting would soon spread to the technical aspects and the various commitments made by the employees on behalf of the company. One can’t be sure if the same guy will be around the next time. At the same time, it is not easy to switch vendors in the interest of continuity.

3. The Independent Director community: Those who have been Directors only in name will start wondering if it was all a mistake, especially if they have a reputation to stake. They will stay awake at nights worrying if the managements of the companies where they are serving as Directors, are keeping dirty secrets away from them and when these skeletons would surface. Actually, this would be a blessing in disguise because Independent Directors would perhaps for the first time act really independently!!

4. The Auditor Community: It is quite unlikely that the Auditors were fooled for so long but even if they were, it is a serious act of omission which would call for criminal liability under the existing provisions. Now Auditors will be a tainted lot for some time but like the directors, it is a great opportunity for them to put their act in place and start really auditing than just sign on the dotted lines!!

More to follow!

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3 Comments

  1. Venkat said,

    January 12, 2009 at 9:02 am

    Good… Not indepth analysis.Competitors like Infosys,TCS,Wipro And IBM will benefit.It is better to choose IBM…..Many clients like GE may choose IBM…
    The employees were not wary.the directors like Ram Myanampatti are free after the fraud.This shows the incapability of the Govt.
    Stock market driven companies including reliance will face the same fate.All investors must be aware of that.Also the big five auditors will be looked upon as big five frauds in days to come.
    Wipro has cleared one more skeleton of World bank bribing by giving shares to world bank people.Senapati has admitted that on TV.Media instead of bringing out the truth about the hollw nature of all IT giants is still supporting them as if it will harm bussiness.
    The major loser is India and its law abiding citizens.

  2. Padmanabhan said,

    January 13, 2009 at 11:48 am

    Hi Badri,

    What do you think can be done to ensure this does not happen again in the Indian Corporate Scene.

    Regards
    Padmanabhan

  3. March 15, 2010 at 12:40 pm

    Nice post. I have tweeted the link on twitter too. You could also add the new drama on Tech Mahindra acquisition.


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